Fitch Downgrades Malaysia's Petronas

New York-based credit ratings agency Fitch has downgraded the long-term foreign- and local-currency issuer default ratings (IDRs) of Malaysia's Petronas from A- to BBB+, it said on December 8, in line with its identical revision for the Malaysian state.

The government-owned company's standalone credit profile is assessed by Fitch at AA-, though, which is stronger than that of its owner and reflects the company's "very strong financial profile, large scale and integrated oil and gas operations," the agency said.

Petronas, which generates most of its earnings from LNG exports, accounted for more than 15% of the Malaysian government's revenue over the last five years, Fitch said. The company's upstream volumes should fall by 4% in 2020 as a result of weaker demand in the wake of the pandemic, the agency said, while its LNG, downstream petroleum and petrochemical sales are due to contract by 2-3%.

"We expect a gradual economic recovery to support revival in demand for gas and petroleum products with volumes returning to pre-pandemic levels over the next 12-18 months, although downside risks remain," Fitch said.